Rovaniemi's tourism attracts international visitors from all over the world. This creates a strong demand for high-quality accommodation. For investors, short-term rentals offer a higher profit potential than traditional rental activities, but achieving the best net profit requires careful management of the figures.
Rental income is taxable income, but the tax authorities also allow for extensive deductions. Carefully planned tax optimisation ensures that tax is only paid on the actual net profit. That way, earnings won't go to waste due to an incomplete tax return. Knowledge of tax regulations and systematic recording of expenses form the basis for profitable investment activities in the north.
How does Airbnb taxation work in practice?
In Finland, income earned from short-term rental activities conducted by a private individual is taxed as capital income. According to the Tax Administration's regulations, the tax rate for capital income is 30% up to €30,000. For the portion exceeding this limit, the tax rate is 34%. Taxation applies to net income. Therefore, all actual expenses incurred from rental activities must first be deducted from rental income.
If the gross annual income from the property is 30,000 euros and the allowable deductions are 12,000 euros, the taxable capital gain is 18,000 euros. The tax payable on this amount is 5,400 euros, leaving the investor with a net after-tax income of 12,600 euros.
Airbnb automatically forwards confirmed booking information directly to the Finnish Tax Administration. You must still declare and meticulously check all rental income in your own tax return. From a tax perspective, the activity is considered capital income when it is passive investment activity. However, if hotel-type ancillary services are continuously offered at the property, or if the activity is exceptionally extensive and professional, the Tax Administration may classify it as business income, which is taxed under different rules.
Deductible expenses – how to legally save on taxes
The best way to improve the net return on an investment property is to make full use of statutory deductions. All expenses directly related to earning income can be deducted for tax purposes. An investor only pays tax on the portion that remains after essential maintenance costs have first been deducted from gross income.
In owner-occupied apartments, maintenance fees and water charges are significant deductible items. Capital or financing fees can also be deducted in taxation as an annual expense if the housing company has recognised them in its accounts. This information can be confirmed with the property manager. In addition, service costs related to rentals, such as agency fees charged by the Airbnb platform and professional Short-term rental management service costs, are entirely deductible.
What can you deduct from your taxes?
Running costs and maintenance
Maintenance fees, electricity, water, and heating costs, as well as the internet connection, are deductible for the period that the apartment has been available on the rental market or rented out.
Furniture, textiles and accessories
Bed linens, towels, tableware, and detergents acquired for lodgers, as well as provided coffees and teas, are deductible expenses. Larger furniture purchases, such as beds and sofas, can be deducted either all at once as an annual expense (for single purchases up to €1,200) or through annual depreciation.
Services produced by professionals
Cleaning, laundry services, key management, and full-service hosting fees provided by an external partner are direct income-generating expenses, which fully reduce taxable income.
If an investment property is exclusively used for short-term rentals all year round, expenses can be deducted in their entirety, even for days when the property was not occupied. The prerequisite is that the property has been actively listed and marketed on rental platforms. If the property is partially used for personal holiday accommodation, expenses must be divided strictly in proportion to the actual rental and usage days.
How to correctly declare Airbnb income and deductions
The Tax Administration now automatically receives information on income earned through digital platforms thanks to the EU-wide reporting obligation, also known as the DAC7 directive. Therefore, all income generated through accommodation platforms is already known to the tax authorities. However, it is the investor's responsibility to check the pre-filled information and add all deductions related to income generation to their tax return.
Income and deductions are most easily reported in the OmaVero service in the spring, usually in early May. To ensure that filing your tax return goes smoothly, it's a good idea to keep accurate and systematic records of all transactions throughout the year.
Recording income as gross
Always state the gross rental income, meaning the total amount the customer paid for their accommodation. Do not deduct platform service fees or cleaning fees directly from this figure, but state them separately in their own expense categories. This ensures that your declaration matches the tax authorities' records and avoids unnecessary clarification requests.
Keeping receipts and proof of payment
Keep all receipts, invoices, and platform reports carefully for six years from the end of the tax year. Receipts are not sent attached to the tax return, but the Tax Administration may request to see them during spot checks or in connection with more detailed clarifications. Digital archiving saves considerable time.
Value added tax on accommodation activities – when does it become relevant?
When short-term rental activity shifts from being occasional to regular and goal-oriented, value-added tax (VAT) rules come into play. Mere occasional rental or the rental of a single property does not yet obligate registration as a VAT payer. However, the situation changes if the activity meets the criteria for professional accommodation services and the turnover for the calendar year exceeds the VAT registration threshold, which is €20,000.
The VAT rate for accommodation services in Finland is 13.5 percent. In accommodation activities considered liable to VAT, this tax rate is added to the price of accommodation and remitted to the Tax Administration.
Becoming liable for VAT also offers financial benefits. VAT-registered activities entitle you to deduct the VAT portion from all purchases made for rental activities. This means that the actual cost of items such as furniture, linens, cleaning services, and other maintenance costs is reduced by the amount of VAT. This saves tangible money and improves the overall return on investment.
Effortless financial management with a full-service partner
Taxation of short-term rentals requires precision. Every receipt, supply purchase, and platform fee directly impacts the amount of profit you take home. However, keeping constant track of expenses and income, and archiving receipts can easily take up time. You could rather use this time to search for a new investment property or enjoy your free time.
An external partner makes this process effortless. You don't have to search for receipts from separate systems yourself, as you'll receive a clear, itemised monthly report of actual income and deductible expenses. This significantly simplifies filing your tax return and helps keep your financial figures up-to-date without any extra work. You can read more about the topic by reading other useful publications. articles on short-term rentals about investment properties.
Do you want to maximise the return on your investment property without the administrative hassle?
Host It offers a full-service hosting solution in Rovaniemi. We take care of the professional styling, cleaning, guest communication, and dynamic pricing of your accommodation. Every month, you will receive clear settlement reports from us, making it easy and straightforward to complete your tax return or provide information for accounting.
Careful tax planning ensures the best return
Rovaniemi's international appeal offers good opportunities for property investors, and short-term letting is a viable way to improve the return on an investment portfolio. The highest benefit from a high gross yield is only realised when the cost structure and tax planning are in order. When every deductible expense, from service charges to cleaning services and furniture purchases, is accurately recorded, taxable income is reduced and the net retained amount increases.
Adhering to regulations and utilising partner reports eliminates extra effort when filing tax returns. With a functional process in place, investment activities remain a worry-free and easily manageable source of income year after year.